The Too Big To Fail Banks Are Now Much Bigger
And Much More Powerful Than Ever

The Too Big To Fail Banks Are Now Much Bigger And Much More
Powerful Than Ever

The Democrats, the Republicans and especially Barack Obama
promised that something would be done about the too big to fail
banks so that they would never again be a threat to destroy our
financial system. Well, those promises have not been kept and
the too big to fail banks are now much bigger and much more
powerful than ever. The assets of the five biggest U.S. banks
were equivalent to about 43 percent of U.S. GDP before the
financial crisis. Today, the assets of the five biggest U.S.
banks are equivalent to about 56 percent of U.S. GDP. So if
those banks were "too big to fail" before, then what are they
now? They continue to gobble up smaller banks at a brisk pace,
and they continue to pile up debt and risky investments as if a
day of reckoning will never come. But of course a day of
reckoning is coming, and when it arrives they will be expecting
more bailouts just like they got the last time.

The size of these monolithic financial institutions is truly
difficult to comprehend. They completely dominate our financial
system and everywhere you look they are constantly absorbing
more wealth and more power. The following comes from a recent
Bloomberg article....

Five banks -- JPMorgan Chase & Co. (JPM), Bank of America Corp.
(BAC), Citigroup Inc., Wells Fargo & Co. (WFC), and Goldman
Sachs Group Inc. -- held $8.5 trillion in assets at the end of
2011, equal to 56 percent of the U.S. economy, according to
central bankers at the Federal Reserve.

Five years earlier, before the financial crisis, the largest
banks’ assets amounted to 43 percent of U.S. output. The Big
Five today are about twice as large as they were a decade ago
relative to the economy

Despite all of the talk from the politicians, they just keep
getting bigger and bigger and bigger.

So why isn't anything ever done?

Well, one reason is because these gigantic financial entities
funnel huge quantities of cash into political campaigns.

For example, Barack Obama gives nice speeches about the dangers
of the too big to fail banks, but he is also more than happy to
take their campaign contributions. Goldman Sachs, JPMorgan Chase
and Citigroup were all ranked among his top 10 donors during the
2008 campaign.

So do you really expect that Barack Obama is going to bite the
hands that feed him?

Of course he is not going to do that.

The truth is that the Obama administration and the Federal
Reserve have done everything they can to make life very
comfortable for the big Wall Street banks.

During the last financial crisis, the too big to fail banks were
absolutely showered with bailouts.

Meanwhile, hundreds of small and mid-size banks were allowed to
die.

When representatives from those small and mid-size banks
contacted the federal government for help, often they were told
to try to find a larger bank that would be willing to buy them.

Sadly, the last financial crisis simply accelerated the
consolidation of the banking industry in the United States that
has been going on for several decades.

Today, there are less than half as many banks in the United
States as there were back in 1984.

So where did all of those banks go?

They were either purchased by bigger banks or they were allowed
to go out of existence.

This banking consolidation trend has allowed the big Wall Street
banks to absolutely explode in size.

Back in 1970, the 5 biggest U.S. banks held 17 percent of all
U.S. banking industry assets.

Today, the 5 biggest U.S. banks hold 52 percent of all U.S.
banking industry assets.

So where will this end?

That is a good question.

The funny thing is that Federal Reserve Chairman Ben Bernanke
and other Fed officials keep giving speeches where they warn of
the dangers of having banks that are "too big to fail". For
example, during a recent presentation to students at George
Washington University, Bernanke made the following statement
about the U.S. banking system....

"But clearly, it is something fundamentally wrong with a system
in which some companies are 'too big to fail.'"

So does that mean that Bernanke is against the too big to fail
banks?

Of course not.

The truth is that he showered those banks with trillions of
dollars in bailout money during the last financial crisis.

The amount of money in secret loans that some of the big Wall
Street banks received from the Federal Reserve was absolutely
staggering. The following figures come directly from a GAO
report....

Bernanke has shown that he is willing to move heaven and earth
to protect those big banks.

So what did those banks do with all that money?

They certainly didn't lend it to us. Lending to individuals and
small businesses by those big banks actually went down
immediately after those bailouts.

Instead, one thing that those banks did was they started putting
massive amounts of money into commodities.

One of those commodities was food.

Over the past few years, big Wall Street banks have made huge
amounts of money speculating on the price of food. This has
caused food prices all over the globe to soar and it has caused
tremendous hardship for hundreds of millions of families around
the planet. The following is from a recent article in The
Independent....

Speculation by large investment banks is driving up food prices
for the world's poorest people, tipping millions into hunger and
poverty. Investment in food commodities by banks and hedge funds
has risen from $65bn to $126bn (£41bn to £79bn) in the past five
years, helping to push prices to 30-year highs and causing sharp
price fluctuations that have little to do with the actual supply
of food, says the United Nations' leading expert on food.

Goldman Sachs alone has earned hundreds of millions of dollars
in profits from food speculation.

Can you imagine what kind of mindset it takes to do this?

Can you imagine taking food out of the mouths of hungry families
on the other side of the world so that you and your fellow
employees can pad your bonus checks?

It really is disgusting.

But that is the way the game is played.

It is set up so that the big guy will win and the little guy
will lose.

The other day I wrote about how this is particularly true when
it comes to our system of taxation.

Well, since that article I have discovered some new numbers that
were just released by Citizens for Tax Justice. Some of the
things that they have uncovered are absolutely amazing....

Between 2008 and 2011, Verizon made a total profit of $19.8
billion and yet paid an effective tax rate of -3.8%.

Between 2008 and 2011, General Electric made a total profit of
$19.6 billion and yet paid an effective tax rate of -18.9%.

Between 2008 and 2011, Boeing made a total profit of $14.8
billion and yet paid an effective tax rate of -5.5%.

Between 2008 and 2011, Pacific Gas & Electric made a total
profit of $6 billion and yet paid an effective tax rate of
-8.4%.

So why should middle class families continue to be suffocated by
outrageous tax rates when hugely profitable corporations such as
General Electric are able to get away with paying nothing?

Our current tax system is an utter abomination and should be
completely thrown out.

But as is the case with so many other things, our current system
is going to persist because the "big guys" really enjoy the
status quo and they are the ones that fund political campaigns.

It would be bad enough if the "big guys" were beating us on a
level playing field.

But the truth is that the game has been dramatically tilted in
their favor and they know that the politicians are going to take
care of them whenever they need it.

So what is going to happen the next time the too big to fail
banks get into trouble?

They will almost certainly get bailed out again.

Unfortunately, the big Wall Street banks continue to treat the
financial system as if it was a gigantic casino. The derivatives
bubble just continues to grow larger and larger, and it could
burst and absolutely devastate the entire global financial
system at any time.

According to the New York Times, the too big to fail banks have
complete domination over derivatives trading. Every month a
secret meeting that includes representatives from JPMorgan
Chase, Goldman Sachs, Morgan Stanley, Bank of America and
Citigroup is held in New York to coordinate their control over
the derivatives marketplace. The following is how the New York
Times describes those meetings....

On the third Wednesday of every month, the nine members of an
elite Wall Street society gather in Midtown Manhattan.

The men share a common goal: to protect the interests of big
banks in the vast market for derivatives, one of the most
profitable — and controversial — fields in finance. They also
share a common secret: The details of their meetings, even their
identities, have been strictly confidential.

When the derivatives market fully implodes, there will not be
enough money in the world to bail everyone out. According to the
Comptroller of the Currency, the too big to fail banks have
exposure to derivatives that is absolutely outrageous. Just
check out the following numbers....

JPMorgan Chase - $70.1 Trillion

Citibank - $52.1 Trillion

Bank of America - $50.1 Trillion

Goldman Sachs - $44.2 Trillion

So what happens when that house of cards comes crashing down?

Well, those big banks will come crying to the federal government
again.

They will want more bailouts.

They will claim that if we don't give them the money that they
need that the entire financial system will collapse.

And yes, if several of the too big to fail banks were to
collapse all at once the consequences would be almost
unimaginable.

But of course all of this could have been avoided if we would
have made much wiser decisions upstream.

Our financial system is more vulnerable than it ever has been
before, and the too big to fail banks just continue to grow.

The lessons from the financial crisis of 2008 have gone
unheeded, and we are steamrolling toward an even greater crash.